“Crowdfunding” seems to be the latest buzzword these days.
What exactly is it, and how does it work?
What is Crowdfunding?
In the simplest terms, crowdfunding is a new way of raising funds whether for business or philanthropic purposes. In the early days, the only sources of funds were bank loans, angel investors, venture capitalists, loans from family and friends or donations. Today, crowdfunding offers an interesting and novel alternative.
Crowdfunding means exactly what it sounds like. The funds basically originate from a crowd of individuals. The “investors” are not necessarily rich or high-net-worth individuals. They could be ordinary guys like you and me.
The person wishing to raise funds, must conceptualise and communicate a pitch on the crowdfunding platform to attract the interest of would be investors/funders. This needs to be a convincing pitch as there are hundreds of projects competing for the attention of donors.
Often the project and the pitch is communicated by way of a marketing campaign run on a social network like Facebook or Twitter, or a YouTube video. If it goes viral and becomes really popular, the lucky campaign creator may even succeed in attracting a celebrity to support their project or cause, which will really help reel in the big-time donors!
Which leads to the next question – why would a group of individuals want to fund your idea or project or business? What’s in it for them?
Why do donors fund a crowdfunding project?
The answer, strangely enough, is often nothing other than sheer altruism and the desire to do something good for their fellow man. Some donors and supporters may be driven by a need to contribute to good cause, but being of limited means, cannot consider contributing a large sum. The concept of crowdfunding allows them to fulfill their social contribution goals while still being able to meet their own financial needs.
Also, donors and supporters feel a sense of shared destiny with the project, product or cause being funded – they see themselves as having helped shape it and having been a part of the creation process.
This concept is quite mature in the developed world. And while it is not so familiar to the Asian mindset, it is certainly catching on amongst today’s young entrepreneurs and philanthropists, even in Malaysia.
What do the crowdfunding platforms get?
The website operators of course for the most part, collect a fee as a percentage of funds raised to fund their own investment in product and platform development as well as credit card processing and other back-end fees. Some platforms run 100% on donations, meaning that they do not take any percentage off the amount of funds raised by the campaign creator.
- Top 10 Crowd Funding Websites
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Top 10 Crowdfunding Websites
Let’s explore 10 top crowdfunding websites today (based on traffic as rated by online sources).
1. Kickstarter (www.kickstarter.com)
Kickstarter accepts creative projects from diverse areas ranging from science and technology to music, health, gimmicks and gadgets.
2. Indiegogo (www.indiegogo.com)
Project campaigns of all kinds can be run on this platform. Campaigns are categorized under creative projects, cause-related projects and entrepreneurial projects.
3. GoFundMe (www.gofundme.com)
Donors can contribute to a variety of causes and projects involving real people with real needs and also those with an idea to do something good, but who do not have the funds. Categories include Accidents & Emergencies, Celebrations & Special Occasions, Dreams Hopes & Wishes, even Weddings & Honeymoons!
4. YouCaring (www.youcaring.com)
This platform supports fund-raising for causes such as medical expenses, educational assistance, funerals, adoption, animal rescue and other social causes.
5. Giveforward (www.giveforward.com)
This platform specifically caters to medical needs. Most of the campaigns on this site have been set up by families to raise funds for persons being treated for illnesses or injuries.
6. DonorsChoose.org (www.donorschoose.org)
This platform features campaigns created by teachers and educators who want to raise funds to do something for or with their students. These are usually teachers from US –based state funded schools. Campaigns include raising funds to acquire more reading materials, equipment, workspace, recreational facilities as well as campaigns to raise funds to take the students to watch a musical or a performance.
7. Fund Anything (www.fundanything.com)
This platform features a variety of large and small scale projects to fund. Categories include business ideas, special events, causes and creative art projects.
8. Fundrazr (www.fundrazr.com)
This platform supports fund-raising for causes such as medical expenses, educational assistance, alumni & clubs, business, creative arts and community projects. It also has a separate category for Legal projects, for which donors can support human rights and social justice causes.
9. SoMoLend (www.somolend.com)
This platform allows for both borrowing and lending. Investors can put up money to invest in a business or neighbourhood project that they care about, with an expected rate of return. Small businesses can apply for a loan with competitive interest rates.
10. Pitchin (www.pitchin.my)
Not to be left behind, Malaysia also has its very own crowdfunding website at www.pitchin.my. Current causes featured are mostly from the community sector.